Community Credit Co. v. Gillham

• Decision Date: 25 January 1974
• Docket Number: No. 39018,39018
• Citation: 191 Neb. 198,214 N.W.2d 384
• Parties: , 13 UCC Rep.Serv. 1176 COMMUNITY CREDIT CO., a corporation, Appellee Cross-Appellant, v. Joe GILLHAM, d/b/a Gillham's Auto Sales, Appellant Cross-Appellee.
• Court: Nebraska Supreme Court

Page 384

214 N.W.2d 384

191 Neb. 198, 13 UCC Rep.Serv. 1176

COMMUNITY CREDIT CO., a corporation, Appellee Cross-Appellant, v. Joe GILLHAM, d/b/a Gillham's Auto Sales, Appellant Cross-Appellee.

No. 39018.

Supreme Court of Nebraska.

Jan. 25, 1974.

Syllabus by the Court

1. When property subject to security interest perfected in another state is removed to Nebraska, secured party has 4 months to locate property and perfect his security interest in Nebraska, and if he fails to file in Nebraska within 4 months, protection of the security interest ceases and his interest is thereafter subject to be defeated like any other unperfected security interest.

2. Where property subject to security interest perfected in another state is removed to Nebraska, subsequent purchaser during 4-month period of statutory protection which secured party had to perfect its interest in Nebraska is not retroactively given superior title, although secured party fails to perfect its interest in Nebraska.

3. The holder of a security interest in an automobile which was perfected pursuant to the laws of a nontitle state, who had no knowledge of its removal to this state, has priority over a Nebraska purchaser without knowledge of the security interest who purchases the automobile with a clear Nebraska title within 4 months of its arrival in Nebraska.

4. This court will not review testimony in the form of affidavits used in the trial court on the motion for a new trial unless such affidavits have been included in and presented by a bill of exceptions.

5. The words 'unavoidably prevented' refer to circumstances beyond the control of the party desiring to file a pleading in our courts. The law requires diligence on the part of clients and attorneys and the mere neglect of either will not entitle a party to relief on that ground.

6. Property which cannot be returned in a replevin action is to be valued as of the time of trial.

Robert E. Paulick, Grand Island, for appellant.

O. Wm. VonSeggern, of Cunningham, Blackburn & VonSeggern, Grand Island, for appellee.

Heard before WHITE, C.J., McCOWN and NEWTON, JJ., and LYNCH and WARREN, District Judges.

WARREN, District Judge.

This is a replevin action by plaintiff Community Credit Co., a Minnesota corporation, for the return of a 1971 Hornet automobile, or the value thereof, from the defendant Joe Gillham, doing business as Gillham's Auto Sales, of St. Paul, Nebraska. After two special findings by the jury, the court entered judgment for plaintiff for $1,700. Defendant has appealed and plaintiff has cross-appealed.

The evidence establishes that on April 15, 1971, Jean C. Grapentin, then residing in Hennepin County, Minnesota, purchased a new 1971 Hornet automobile from plaintiff's assignor under a conditional sales contract which was signed by her husband Stanley C. Grapentin as guarantor. Pursuant to that transaction plaintiff filed a financing statement on April 19, 1971, in the office of the register of deeds of Hennepin County, Minnesota. Before a recent enactment which became effective October 1, 1972, Minnesota was a nontitle state, and hence Mrs. Grapentin obtained only a registration card from the Minnesota Motor Vehicle Division. The Minnesota registration card did not provide a space for listing of liens and encumbrances. The payments on the conditional sales contract became 30 days past due in October 1971. In the first part of October 1971, Stanley C. Grapentin brought the automobile to Grand Island, Nebraska, where he stayed temporarily while frequenting used car lots with a view to trading off his wife's automobile for a different car. With his estranged wife in California, Stanley C. Grapentin, identifying himself as Jean C. Grapentin, endorsed the Minnesota registration card before a Grand Island notary public, then signed his wife's name a to a Nebraska application for a certificate of title in the office of the county clerk of Hall County, and on November 12, 1971, obtained a 'clear' Nebraska certificate of title in the name of Jean C. Grapentin showing no liens or encumbrances. He then again signed his wife's name to the assignment portion of the Nebraska title, before a St. Paul, Nebraska, notary public, and on November 15, 1971, sold the automobile to the defendant for a stated consideration of $2,285. which consisted of $900 cash and an older automobile. Plaintiff first learned that the automobile might be in Nebraska in late November or early December 1971, and inquired of the defendant as to the whereabouts of the automobile. Defendant had sold the Hornet automobile on December 3, 1971, to a man in Denver, Colorado, whom he could not name at the time of trial, for '$1900.00 and something,' and defendant testified that he had made no record of the sale. The testimony of Stanley C. Grapentin was offered by deposition taken at the Nebraska Penal and Correctional Complex 2 weeks before the trial.

The question presented by this fact situation is whether defendant purchased the 1971 Hornet automobile subject to plaintiff's security interest.

The trial court submitted two issues to the jury: (1) Whether or not Stanley C. Grapentin had the automobile in Nebraska for more than 4 months; and (2) the value of the automobile on January 17, 1972. The jury returned special findings that Grapentin had the automobile in Nebraska less than 4 months and fixed the value at $1,700 on the date the petition in replevin was filed. By submitting only these two issues, the trial court in effect found that plaintiff was entitled to recover if the jury found that the automobile had not been in Nebraska for at least 4 months prior to its sale to defendant.

The broad problem of maintaining security interests in highly mobile, heavily financed and readily saleable vehicles has caused most states to enact 'Certificate of Title' laws requiring that all liens and encumbrances (security interests) be noted on the face of the title certificate. In 1971, Minnesota had no such title law, while Nebraska did. The Uniform Commercial Code has attempted to provide certainty in this field of commerce by the provisions of section 9--103, U.C.C.

Section 9--103, U.C.C., has been entirely rewritten effective September 2, 1973, to provide specific rules for goods covered by a certificate of title issued under a statute of this state or of another jurisdiction. See s. 9--103(2), U.C.C., as amended, Laws 1973, L.B. 363, s. 1. The references which follow are necessarily to section 9--103, U.C.C., as it existed before the 1973 amendment.

Section 9--103(3) U.C.C., provides: 'If personal property * * * is already subject to a security interest when it is brought into this state, the validity of the security interest in this state is to be determined by the law (including the conflict of laws rules) of the jurisdiction where the property was when the security interest attached. * * * If the security interest was already perfected under the law of the jurisdiction where the property was when the security interest attached and before being brought into this state, the security interest continues perfected in this state for four months and also thereafter if within the four month period it is perfected in this state.'

Defendant argues that the perfection of plaintiff's security interest is governed by the laws of the state which issued the certificate of title (Nebraska) and cites subsection (4) of section 9--103, U.C.C., which provides: 'Notwithstanding subsections (2) and (3), if personal property is covered by a certificate of title issued under a statute of this state or any other jurisdiction which requires indication on a certificate of title of any security interest in the property as a condition of perfection, then the perfection is governed by the law of the jurisdiction which issued the certificate.'

Defendant contends that since the Nebraska certificate of title act requires noting of the security interest on the title, the plaintiff cannot assert a valid security interest in the automobile as against the defendant holding a clear Nebraska certificate of title. Here, there was a substantial question as to whether or not the defendant was a bona fide purchaser without notice of plaintiff's security interest, but our decision will be based on the premise that defendant had no prior notice when he purchased the automobile.

By official comment 7 to section 9--103, U.C.C., the editorial board of the Uniform Commercial Code attempts to clarify the application of the above-quoted subsections (3) and (4), by stating: 'Collateral other than accounts, contract rights, general intangibles and mobile equipment may be brought into this state subject to a security interest which has attached and may have been perfected under the laws of another jurisdiction. If the property is covered by a certificate of title, subsection (4) applies. In other cases, under subsection (3) this article applies from the time the collateral comes into this state, except that (1) the validity of the security interest is determined by the law of the jurisdiction where it attached * * * and (2) if the security interest was perfected in the jurisdiction where the collateral was kept before being brought here, it continues perfected in this state for four months after the collateral is brought in, although the filing requirements of this article have not been complied with here. * * * Subsection (3) proceeds on the theory that not only the secured party whose collateral has been removed but also creditors of and purchasers from the debtor in this state should be considered. The four month period is long enough for a secured party to discover in most cases that the collateral has been removed and to file in this state; thereafter, if he has not done so, his interest, although originally perfected in the state where it attached, is subject to defeat here by those persons who take priority over an unperfected security interest.'

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